To answer your direct question, it looks like you need to add a No Penetration contact between those faces and just see how the program reacts to decide what to do from there.

The long story is this. I made a quick duplicate of your study and ran it with "Use soft springs to stabilize model" turned on. It revealed that your study is not stable as its contacts are currently setup:

To fix this I added a new No Penetration contact set between the top piece and the lower structure. This didn't fully stabilize the system though as the top component was still allowed to rotate:

To fix that behavior I cut the model in half and applied a symmetry fixture to the cut faces (since the loading is symmetric) and reran the study:

The study looks pretty stable at this point and will run fine. The handle does still shift but in a way that you might expect in real life. I've attached the modified files for you to look through if you like.

Attachments

I took a quick look through your results. A massive volume of the model exceeds your yield stress. I reset your plot boundaries to show a more illustrative stress plot. Everything that is red failed. Now, this is a fairly coarse mesh but I believe that you will find that even with smaller element sizes this model will still fail with these boundaries.

Please do not rely on color coding to mean your model has failed. The final decision to build your design has to be made from the inspecting all the plots and determining if you have had a failure. Red is not always color coded to be a failure so you will need to check that the plot legend is showing you what you need to see. Looking directly at the stress plot though you still have a failure at 1471.5 N.

Using simulation without a background in Mechanics of Materials can be dangerous. Encouraging such could also have ramifications, legal and otherwise.

If this hook example is a life support, let's say, who here would trust it after this exchange?

Next, Nigel, consider that the software often gives faulty results. As you have seen, with improper inputs and incorrect assumptions the software CAN'T give a proper result. And in many other cases, it is incapable no matter what of a proper result.

And what about mesh refinement? Anybody that doesn't understand this concept maybe should question if they should be using FEA in the first place.

With several thousand hours under my belt using Simulation, going way back to when it was known as Cosmos as well as using other packages, I am STILL learning the capabilities and limitations of this imperfect software. But in my case as many others, I can do a variety of benchmark calculations to verify the results and do a sanity check.

In the absence of this capability, the knowledge and understanding of how to do benchmark calculations, physical models and rigorous testing should be considered a minimum.

Proceed with caution. The goal is not to make pretty rainbows. It's to intimately understand the potential failure points of a structure. This can't be done with software alone, no matter how good it is.

If you're at university, you will hopefully have the opportunity to take courses in stress analysis, so you can check the computer and be more confident in what is coming out of the software or understand what you need to do to make it right.

I would say that this is vital, the classical understanding of the mechanics of materials, not only understanding the math and science behind what the software is doing, but also learning about applying loads properly and interpreting results.

The fact is that if you do learn the engineering side, you will be way ahead of countless thousands of people who think they can run this software without any formal foundation.